Lean in a Make-To-Order Job Shop Environment

In 2008, CMA began working with a small company in the  Mid-Atlantic region that was a make-to-order stone (e.g. granite, marble,  glass) fabricator.  As with all “job  shops” there was great variation from order to order.  Orders could vary from a single countertop,  to an entire kitchen, to the complete interior and exterior of a commercial  bank.  Adding to the challenge was the  incredible amount of competition in the industry resulting in tremendous  price and service (i.e. lead time) sensitivity.
An enterprise value stream map was created for the  business.  It became apparent that  inconsistent customer service and lengthy lead times through the  pre-production and production processes were hindering the company’s ability  to garner new business.  Excessive costs  due in part to the inability to handle demand variability in production (e.g.  labor management) as well as quality issues (e.g. scrap, rework) were further  harming its competitiveness.  The  company had attempted to implement an Enterprise Resource Planning (ERP)  system to provide much needed planning capability and to improve organization  of operations in general.  By the time  of the VSM event, it was widely agreed that the 3-year ERP effort was a  failure.  Instead, the company chose to  pursue the Lean Enterprise path.  Its  emphasis on “simple and visual” struck a chord with an exasperated owner.

As with many lean transformations, the effort began with  education of the workforce, and a simple clean-up of the facility as “5S” was  initiated.  In addition, a study was  conducted to determine an appropriate measure of demand – a “takt time” for the business.  This is often a difficult task in a job  shop environment.  “Linear feet of  treated edge” was determined to be appropriate because it directly correlated  to the amount of labor hours required to “finish” the order.  Finishing was the real constraint of the  production system.  Only on occasions  would the various “upstream” equipment related processes become  constrained.  This could be handled as  the need arose.  It was agreed that it  would be Finishing that would drive the entire system.  A simple spreadsheet based tool was created  to monitor demand versus capacity making use of information available from  the quote when an order was received.    This information was also used to “level load” production via a   “fixed” schedule.

Flexibility in production was created by an extensive  cross-training effort making use of standard work and “Job Instruction (JI)”   techniques.  The flow of materials and  orders was controlled by the application of a “pull” system.  The pull system did not allow for orders to  accumulate on the shop floor as had happened in the past.  Therefore, much desired workplace  organization could be maintained at all times – during busy periods, as well  as slow times.  The pull system also  triggered re-allocation of resources to other processes when necessary.  A set number of carts were used in the pull  system as well as a series of “first-in-first-out” (FIFO) lanes.

Within one year, the result was a very predictable system  that could provide a consistent two week lead time to the customer, including  the pre-production process.  On time  Delivery was improved from 85% to 98%.    Productivity improvement of approximately 20% was realized and quality  costs reduced by 50%.  The focus in  2010 is to reduce overall lead time to one week which will require a  re-design of the pre-production process in addition to further enhancements  to the production system.  Total  Productive Maintenance (TPM) will also be an important initiative in the  coming year.

Lean Transformation in a Design-to-Order Company

In 2009, Change Management Associates began working with a  design-to-order company in the video and audio disk business.  The company provided a full range of  services to its customers.  It could create  graphics for the CD or DVD, its packaging and promotional materials, or it  could make use of customer supplied graphics.    Customers could request custom packaging or make use of existing  designs.  All orders went through a   “pre-press” process to prepare for the various printing and bindery  operations that would be necessary to process the order.  Of course, all orders went through one of  several replication or duplication processes to produce the requisite number  of disks.  The company even offered “engineering”   services to help develop the content of the disk.  This “one-stop” shopping created great  challenges to operations and the business system as a whole.

An Enterprise Value Stream Map was created for the   “Quote-to-Cash” process, taking into account the varying nature of  orders.  The current state displayed  numerous hand-offs through the pre-production process as each order  accumulated an estimated 5,000+ feet in distance traveled.  In production, the issue was “getting the  right item in the right quantity at the right time” to the Packaging  Department so that it could complete the order.  “On-Time-Delivery to Packaging” was  estimated to be approximately 70%.    Also the amount of work-in-process (WIP) in the production system at  any time displayed wild variation.    This undermined workplace organization, and created much non-value  added activity handling, re-handling, searching and the like.

The company addressed the pre-production flow by  implementing flow concepts in the office.    Initially a single cross-functional team or “cell” was piloted to  prove the concept.  Cross training was  required as what had previously gone through seven departments would be  consolidated into four roles.  Then the  roles were co-located and assigned to particular Inside Sales  associates.  This approach would allow  for the more effective communication of often ambiguous information common in  such creative processes.  The results  of the first team measured after several months was a 50% reduction in lead  time, and an estimated 25% productivity improvement when it was compared to  the historic departmental silo approach.    The “Project Manager” role was able to handle 50% more orders or   “projects” at any time.  A second team  was initiated with some modification as the pilot continues.  Ultimately a total of 9 to 10 such teams  will be needed to match demand.

In production, the clear need was for a Pull System.  After all, the objective of pull is to have   “the right item in the right place in the right quantity at the right time”.   Several sequential pull lanes were  carefully located throughout the disk operation leading up to Packaging.  Each was sized according to demand and  desired throughput time.  Carts would  be used to execute the pull system.    Adherence to a set schedule was also established.  The pull system provided much needed  stability and predictability to the system.    WIP no longer varied wildly.  Packaging  received much better service from its internal suppliers as On Time Delivery  improved to 85% and climbing.

Based on this experience, the company will be implementing  a similar system throughout the printing and bindery operation leading up to  Packaging in 2010.  Several issues with  the “batching” of orders in the pre-press operations also had to be  addressed.  Previously orders were  batched to maximize material usage but this practice created problems when  orders required over several days were batched together.  Several “experiments” were run.  The conclusion was that batching within the  same day would not increase waste in any significant way.  A further enhancement expected in 2010 will  be to add sequencing rules that will further synchronize the various “paths”   to Packaging, and allow for an additional reduction in WIP while further  improving service.

Lean Product Development

In 2009, Change Management Associates began working with  an existing customer on its product development process.  The company is in the highly competitive  furniture industry.  As with most  companies, they struggled with time to market, the ability to deliver more  designs to market, and accountability for design quality after product  launch.  Particularly challenging in  this industry is the importance of often difficult to describe esthetics,  styles, themes and the like.    Development cycles could take as long as 30 months for projects.  Due to lengthy development times,  anticipating market acceptance was hit or miss.

The existing development system was mapped using the  powerful Value Stream Mapping tool.    During the event key interruptions to the flow of development projects  were identified.  In addition, the  typical difficulties with conveying complete and accurate information  throughout the development process were apparent.  Lack of clear roles and responsibilities  and a general lack of accountability plagued the existing system.

The organization saw the need to implement effective  project management techniques to its development process, well beyond what  was historically done at the company.    In the past project plans were developed, milestones identified,  periodic reviews performed, but performance problems persisted.  Something more was needed.  Simple and visual project management  techniques were implemented.  Visual   “storyboards” were created to manage each development project.  Voice of the customer information was  communicated during a cross-functional kick-off meeting which assured that  often unclear design objectives were more effectively understood by all team  members.  This information was visually  displayed on the storyboard for ongoing reference during the life of the  project.  In the past this information  was shared with a limited number of people who were expected to disseminate it to others.

Clear roles were defined for the project teams, along with  standard work for each.  Project timelines  were created as before but were reviewed more frequently, thereby providing a   “cadence” to each project.  The teams  would meet during weekly “stand-up” meetings, where in the past they met once  a month which was deemed reasonable given the fact that projects took place  over a 18 to 30 month period.  Clear expectations were defined for key  activities due in the coming months, and accountability improved as a  result.   A simple, visual tool was developed to monitor the progress of all projects in process.  This tool could also be used to identify capacity constraints in the development process.  Previously, no such visibility existed.

New technical capability allowed for quick turn around of  product renderings decreasing 1 – 3 months off the back-end of the  development process.  This also  provided the ability to quickly process changes late in the development  process, if necessary.  Apart from this  technological capability, all other changes involved the lean basics of  standard work and visual management.

While still early in the implementation process, changes  made to date are providing a more predictable development system.  Not without some difficulties, most all  development projects are now on schedule, and documentation and quality has  improved.  A consistent 12 month cycle  is now possible for one type of projects and 18 months for another.  This represents an approximate 35-40%  reduction in development lead time.    The development of more products is now possible as capacity has been  freed up.  Approximately 25% more  active projects are being worked on by design teams, and there has been a  decrease in rework on initial specifications.

Rendering of Project “Storyboard”
Rendering of Project “Storyboard”
Rendering of Visual Management Board for Multiple Projects
Rendering of Visual Management Board for Multiple Projects

Lean Leadership Development:
In 2008, Change Management Associates worked with a  manufacturer and distributor of formulated and packaged petroleum  products.  The company had been  practicing lean for about eight years.    The owner felt that they had “lost their way”.  An on-site assessment confirmed this  fact.  The 5S program became simply a  housekeeping effort (part of the 3rd S), and not a very effective  one at that.  Pull systems that were  implemented in the past were not improved over time.  Quick Changeover concepts were not maintained.  Some elements of the lean system were  missing altogether.  There was a steady  decline in the Continuous Improvement culture that was previously prevalent.  A root cause of this “backslide” was the  lack of ongoing leadership development.    New supervisors and managers were hired over time, and key role  changes of existing managers took place.    The lack of some means of ongoing leadership development is a common  cause for an organization’s inability to sustain and build on the gains made  during a lean implementation.

A 40-hour development program was delivered to all  supervisors and managers over several months.    The first part of the program covered the requisite skills of a leader  in a lean enterprise including: Organizing and Planning, Communication, Developing  Trust, Motivation, Observation and Providing Direction.  Foundation “tools” such as Job Instruction  (JI) and Job Relations (JR) were reviewed and the participants given the  opportunity to apply them.  Gemba walks, true 5S audits and other “observation”   related activities were conducted to develop these skills.  Participants developed their own “standard  work” for their particular roles, as part of a “Lean Daily Management System  (LDMS)”.  The LDMS included Visual  Management techniques to help sustain practices over time.  The second part of the program covered   “Plan-Do-Check-Act (PDCA)” and the basic quality management tools which were  not previously put in practice with any consistency.  Projects were identified to assure  application of the tools.  Processes  were put in place to identify and select opportunities for improvement over  time.

Importantly, the organization developed the internal  resources who would deliver training to all new people hired into leadership  roles, as well as to assure continual development of existing leaders over  time.  The company licensed training  materials from CMA for this purpose.    This would provide the organization with the means to sustain in the  future.

Lean Office Train-the-Trainer Program

In 2009, CMA began working with a global manufacturer of  power conditioning devices to develop internal Lean and Continuous  Improvement capability specifically focused on business processes.  The company went through CMA’s Lean Office   “train-the-trainer” program.  The  program consists of two modules: Value Stream Mapping, and Office  Kaizen.  The VSM module develops the  understanding and skills of a select group of individuals to facilitate  events using the value stream mapping technique – the assessment and planning  tool of lean practitioners.  The Office  Kaizen module develops similar abilities to facilitate office kaizen events –  highly focused rapid improvement events.    It is during kaizen events that the changes envisioned in the future  state value stream maps are actually made in the workplace.

The internal individuals expected to serve as future  facilitators would learn the concepts and develop the requisite skills  through actual application of the tools and techniques.  Only by this manner, can the learning be  effective.  Participants went through  three “cycles of learning” for each module – six weeks in total.  Three Value Stream Mapping events were  conducted as well as three Office Kaizens.  This would allow the company to realize  near immediate return on the investment to develop their internal capability  on the road to self-dependency.

Areas that the company chose to address during the program  included the “Order-to-Cash” process, the annual management budgeting  process, and Order Fulfillment.  The  company realized approximately $3,000,000 in bottom line savings during the  program, plus another $500,000 in cost avoidance for the planned purchase of  new software that was deemed unnecessary.    This represented an approximate 28x return on investment.  Other benefits were a reduction in lead  time for the budgeting process from 165 days to 20 days (-88%), and Order  Fulfillment lead time was reduced by 45%.    The lead time to update Price Lists was reduced by 83% which had  previously caused customer dissatisfaction and much related non-value-adding  activity.  In fact the process time  associated with this activity was reduced from 100 hours per week to 20 hours  (80%).

Based on the success of the Lean Office train-the-trainer  program, the company chose to repeat a similar program in each of their main  manufacturing operations beginning in 2010. 

Lean Healthcare

Through an affiliate, CMA worked with a mid-west hospital  to apply lean throughout its operations. Starting in the Emergency  Room/Department, value stream maps were created, and a future state created  that would improve performance and service to patients.  Included was: a form of pull system, near  real time awareness of “takt image”, standard work,  5S, and other lean concepts.  Methods  were implemented to monitor patient lead time upon entering the ER to the  time he or she was seen by a physician.    Visual methods were used to identify patient lead time that exceeded  established “service levels”.  This  triggered a pull system to better insure that service levels would be  maintained.  Workplace organization by application  of 5S techniques were implemented, including standardization of the  examination rooms.  Fundamental changes  in the process sequence by which patients were signed-in, a preliminary  examination performed, triaged and so forth were made to improve flow and the  quality of care.  Many of the changes  were made as part of a series of kaizen events – focused rapid improvement  events involving cross-functional teams of people during a set period of  time.

One kaizen event focused on the information flow,  specifically the update and filing of patient charts.  Historically, information was often lacking  from the charts.  Associates  responsible for documentation processing and billing would discover the  problem when the chart was returned to the office.  Much non-value-added activity ensued to try  to track down the responsible parties to provide the missing  information.  This could take several  days as charts were often turned in at the end of a shift, and the problems discovered  after people had left for the day or for days.  Numerous attempts to follow up would be  made over the subsequent day or days.    A more proactive approach was implemented.  Documentation processing personnel would  walk through ER and go to designated drop-off points to collect charts and  related information.  This occurred at  a regular frequency (every 2 hours).    Problems were discovered in more timely manners, and were more easily  resolved as a result.  This simple  system made use of specially designed moveable carts that included everything  from a laptop computer to label makers, even a trash can – everything to  process the documentation “on the move”.    A prototype was created during the three day kaizen event, and  piloted.  Based on the pilot, modest  revisions were made, and additional carts fabricated.

Clearly many of the lean concepts traditionally found in  manufacturing can be applied to healthcare operations.  It just requires a little creativity, and a  willingness to try.  CMA has worked with  numerous healthcare organizations since the early 1990s to apply operational  excellence concepts to improve performance, increase patient satisfaction,  and improve the quality of care.